Correlation Between Citigroup and Royce Global

Can any of the company-specific risk be diversified away by investing in both Citigroup and Royce Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Royce Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Royce Global Value, you can compare the effects of market volatilities on Citigroup and Royce Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Royce Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Royce Global.

Diversification Opportunities for Citigroup and Royce Global

0.1

Correlation Coefficient

Citigroup  Royce Global

Average diversification

The 3 months correlation between Citigroup and Royce is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Royce Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Global Value and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Royce Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Global Value has no effect on the direction of Citigroup i.e., Citigroup and Royce Global go up and down completely randomly.

Pair Corralation between Citigroup and Royce Global

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.01 times more return on investment than Royce Global. However, Citigroup is 2.01 times more volatile than Royce Global Value. It trades about 0.12 of its potential returns per unit of risk. Royce Global Value is currently generating about -0.03 per unit of risk. If you would invest  6,268  in Citigroup on October 8, 2024 and sell it today you would earn a total of  832.00  from holding Citigroup or generate 13.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Royce Global Value

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Royce Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royce Global Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Royce Global is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Royce Global

The main advantage of trading using opposite Citigroup and Royce Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Royce Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Royce Global will offset losses from the drop in Royce Global's long position.

The idea behind Citigroup and Royce Global Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.